Balevents Ltd v Sartori

Abstract

Land registration – Rectification of register. The claimants brought proceedings against the defendant, contending that he held registered title in respect of part of a pavement in front of a club on a constructive trust for one of them and that the register should be rectified accordingly. The Chancery Division held that, on the facts, the registration had been the result of a mistake. It granted an order, under Sch 4 to the Land Registration Act 2002, removing the defendant as the registered proprietor of the land.

Summary

The judgment is available at: [2014] EWHC 1164 (Ch)

The property in question had been used for some years, first as a jazz club and later, as a lap-dancing club. The first claimant (Balevents) was the lessee of the club. During the course of the proceedings, it assigned its lease to the second claimant. A dispute arose about part of the pavement in front of the club (the disputed area). The defendant, S, who was the general manager of Balevents, contended that his father had run a sandwich bar on the disputed area from around 1974, that he had taken it over in around 1986 and had continued to run it until 1991. The jazz club was operated by a company, for which S was a director from a date before February 1992. The jazz club was taken over by another company, Broomco, in around 2001, of which S had been a director. 

The lease was transferred from Broomco to Balevents in May 2003. In 2009, S successfully applied for the registration of a possessory title in relation to the disputed area. There was evidence that some of the information provided by him, which had led to his registration, had been incorrect. The claimants contended that S, as the then general manager of Balevents, owed a fiduciary duty, that he held his registered title on a constructive trust for one of them and that the register should be rectified accordingly.

The issues for consideration were: (i) whether Balevents was entitled to ownership of the disputed area; (ii) whether S was a fiduciary in connection with the application he had made for a possessory title and whether Balevents had been entitled to be registered as proprietor of the disputed area in place of S; and (iii) whether S’s registration as proprietor of the disputed land had been a mistake which should be rectified. In respect of rectification, S contended that there were exceptional circumstances which vitiated against rectification, namely rectification was sought by Balevents, which could not claim an interest in the land; and that Balevents, through R, who effectively controlled it, had encouraged S to make the application for possessory title of the disputed area. Consideration was given to The Land Registration Act 2002, in particular, para 3(2)(a) of Sch 4 to the Act.

The court ruled:

(1) It was settled law that there was a presumption that the owner of land with a paper title was in possession of the land. If a person, who did not have the benefit of that presumption, wished to show that he was in possession of the land, the burden was on him to show that he was in factual possession of the land and that he had the requisite intention to possess the land. He had show that he had an appropriate degree of physical control of the land, that his possession was exclusive, and that he had dealt with the land in question as an occupying owner might have been expected to deal with it and no-one else had done so. Whether a person had taken a sufficient degree of control of the land is a matter of fact, depending on all the circumstances, in particular, the nature of the land and the manner in which such land was commonly enjoyed. The Act introduced a different regime as to adverse possession in relation to registered land. Under the new regime, a person was not entitled to be registered as proprietor just by being in adverse possession for a period of time. After ten years of adverse possession, he might apply to be registered, but notice of his application was given to the registered proprietor who could block the application. If a person had already been in adverse possession for 12 years prior to the coming into force of the Act, they remained entitled to be registered as the proprietor of the estate (see [79], [84], [87] of the judgment).

On the facts, it was clear that S could not show that any part of the disputed area was held on trust for him when the Act had come into force. Further, he had not been able to show that he had been in possession of any part of the disputed land for ten years, ending on the date of the application in 2009. It was clear that Balevents could not show that any part of the disputed land was held on trust for it when the Act came into force (see [94], [95] of the judgment).

The claim by Balevents for any relief based on the contention that it was entitled to be registered in place of S would be dismissed (see [182] of the judgment).

J A Pye (Oxford) Ltd v Graham [2002] 3 All ER 865 applied.

(2) It was very doubtful whether S was a fiduciary in connection with the application he had made for a possessory title. That application had been largely based on false allegations of fact which emphasised his alleged possession of the land in his personal capacity. In truth, he had simply not been entitled to apply for a possessory title. Even assuming that S owed some fiduciary duty to Balevents in relation to the way in which he went about his application for a possessory title, the application he made was with the knowledge and consent, and indeed active encouragement, of R, who had total control of Balevents. In those circumstances, Balevents could not say that S had broke any duty owed to it and could not assert that S’s registered title of the disputed area belonged in equity to it (see [154] of the judgment).

Balevents’ claim that it was entitled to be registered as proprietor of the disputed area in place of S would be dismissed (see [155] of the judgment).

(3) Paragraph 2 of Sch 4 to the Act provided that the court might make an order for alteration of the register for the purpose of correcting a mistake. If the court had power to make such an order, it had to do so, unless there were exceptional circumstances which justified it not doing so. It was settled law that the burden was on the applicant for rectification to establish that the registered proprietor in possession had, by fraud or lack of proper care, caused or substantially contributed to the mistake and/or that it would for any other reason be unjust for the alteration not to be made (see [158], [161] of the judgment).

Applying settled law to the facts, it was clear that S’s registration had been the result of a mistake.
S was not entitled to be registered as the proprietor of the disputed area. For the purposes of para 3(2)(a) of Sch 4 to the Act, S, by fraud and/or by lack of proper care, had caused and/or substantially contributed to the mistake. The exceptional circumstances in the case did not justify a refusal to order rectification. All of the requirements of Sch 4 to the Act, in relation to the court making an order for rectification, were satisfied (see [168], [175], [180], [181] of the judgment).
An order would be made, under Sch 4 to the Act, removing S as the registered proprietor of the land (see [181] of the judgment).

Baxter v Mannion [2010] All ER (D) 173 (Mar) applied; Walker v Burton [2012] All ER (D) 131 (Apr) applied; Paton v Todd [2012] All ER (D) 164 (May) considered.

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